In an op-ed piece, former US Comptroller of the Currency Brian Brooks and former chief economist of the Office of the Comptroller of the Currency (OCC) Charles Calomiris delve into how stablecoins might play a crucial role in preserving the U.S. dollar’s status as a reserve currency.
The former US OCC officials elaborate on how stablecoins can counter global trends of de-dollarization by generating demand for dollars, even in countries where the local governments do not explicitly support dollarization. They provide examples of nations like Argentina and Venezuela, where citizens turn to stablecoins to safeguard their savings against the volatile value of their national currencies due to high inflation.
Furthermore, Brooks and Calomiris discuss the potential risks of a de-dollarized world, emphasizing the adverse impact it could have on the U.S. economy. They point out that the reserve status of the dollar keeps U.S. borrowing costs lower, a significant advantage given the current high levels of government borrowing and spending.
Highlighting the need for regulation, the authors underscore the importance of Rep. Patrick McHenry’s bill, which aims to establish oversight and guidelines for stablecoin issuers. They stress that effective regulations are crucial for the stablecoin market to reach its full potential, especially in the wake of initiatives like Paypal’s stablecoin PYUSD.
The Clarity for Stablecoins Act, recently passed with bipartisan support by the House Financial Services Committee, is seen as a step towards achieving regulatory clarity and consumer protection in the evolving stablecoin landscape.